S&S LISA/ISA v SIPP

Nsar1

I have 2 adult children (mid 20s), one a homeowner (so LISA isn't an option) the other isn't a homeowner. Neither have a SIPP or ISA. Both have jobs which pay them a shockingly low wage so even with living frugally they have little or nothing left each month, so I want to send them £250 each month to start building up some savings in a lifetime strategy fund, which they can add to when they can. Which is the best option SIPP or ISA?
Bonus points for which lifetime fund and why
Thanks

Albermarle

Depends what you mean by 'lifetime strategy'
If they might need the money in 10 or 20 years time an ISA would be better. If it is for retirement then the pension is better due to the tax relief..

Smudgeismydog

A LISA can be used to save for later life. As long as your children are over 18 and under 40, they can save in it until they are 50, and then withdraw at age 60

Nsar1

Albermarle said:

Depends what you mean by 'lifetime strategy'
If they might need the money in 10 or 20 years time an ISA would be better. If it is for retirement then the pension is better due to the tax relief..

Up to them later in life of course, but on the basis that no-one knows if they'll need a pot of cash in say 15 years time, but they definitely will retire, I'm thinking more that this is retirement money. Thanks

Albermarle

Nsar1 said:

Albermarle said:

Depends what you mean by 'lifetime strategy'
If they might need the money in 10 or 20 years time an ISA would be better. If it is for retirement then the pension is better due to the tax relief..

Up to them later in life of course, but on the basis that no-one knows if they'll need a pot of cash in say 15 years time, but they definitely will retire, I'm thinking more that this is retirement money. Thanks

So with such a very long time frame, normally it would be recommended to invest in 100% equities in a low cost global index tracker. It will be quite volatile at times, so best not to watch it too closely.

As @Smudgeismydog says a LISA for retirement, rather than to buy a first home could be an alternative to a pension. Just make sure it is a S&S LISA, so you have investments in it.

Lifetime ISA (LISA): how they work & best buys - Money Saving Expert

hugheskevi

Assuming they are basic rate taxpayers, do not receive means tested benefits and do not have salary sacrifice available, there is little incentive to put money into a pension beyond their workplace pension and any employer matching on offer.

Putting money into an S&S ISA keeps open the possibility of later putting it into a pension, as well as having access to it should it be needed (which you may view as a positive or negative). Putting it into an S&S ISA initially and a pension later would work out better if they later get access to salary sacrifice or become higher rate taxpayers.

Due to the low LISA annual saving limit, that is more of a use it or lose it allowance. For retirement, it isn't as good as a pension if higher rate relief is available, but better if only basic rate relief is available. For housing it is great, if the first property will be within the price limit. For access before retirement it isn't great due to the penalty, but at least that is an option unlike pension.

But if they have zero cash at end of month, their first priority should be a precautionary cash saving fund and repaying any loan/credit card debt before looking to longer term saving.

Nsar1

hugheskevi said:

Assuming they are basic rate taxpayers, do not receive means tested benefits and do not have salary sacrifice available, there is little incentive to put money into a pension beyond their workplace pension and any employer matching on offer.

Putting money into an S&S ISA keeps open the possibility of later putting it into a pension, as well as having access to it should it be needed (which you may view as a positive or negative). Putting it into an S&S ISA initially and a pension later would work out better if they later get access to salary sacrifice or become higher rate taxpayers.

Due to the low LISA annual saving limit, that is more of a use it or lose it allowance. For retirement, it isn't as good as a pension if higher rate relief is available, but better if only basic rate relief is available. For housing it is great, if the first property will be within the price limit. For access before retirement it isn't great due to the penalty, but at least that is an option unlike pension.

But if they have zero cash at end of month, their first priority should be a precautionary cash saving fund and repaying any loan/credit card debt before looking to longer term saving.

Thank you, all you assumptions are correct. They both maintain rainy day funds and top my knowledge don't carry any debt beyond student debt and the mortgage my son has. 

Nurse2047

I would open a S&S isa or sipp with vanguard and put all into https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-global-all-cap-index-fund-gbp-acc/overview

https://youtu.be/ZfNkyzmdnyg

https://youtube.com/@DamienTalksMoney

https://youtu.be/yG5plUMBtzQ

or if choose a LISA look at 
https://www.dodl.co.uk/